From MarketWatch:
Gold might be up this year, but it’s worth only $800
Analysis: Forecaster who correctly predicted a big drop says gold may fall even moreHT: Ritholtz@Bloomberg
The gold bugs are stirring.
A 10% gain by the yellow metal this year is rekindling hope among long-suffering bulls that the major bear market that began nearly three years ago finally might be over.
They argue that gold will continue to rise because investors will be seeking a hedge against rising inflation, currency fluctuations and geopolitical uncertainty.
Yet according to Duke University finance professor Campbell Harvey, one of academia’s leading experts on gold prices, the odds are poor that the metal will return any time soon to its all-time high in August 2011. That month, the spot Comex gold contract reached an intraday high of $1,929.20, more than $600 above Thursday’s settle price of $1,320.40.
He puts gold’s fair value today at a little higher than $800.
A valuation model Harvey proposed in a National Bureau of Economic Research study 18 months ago, when gold was nearly $1,700 an ounce, correctly foresaw that the metal was overvalued.
That model is based on the tendency for gold to decline whenever the ratio of its price to the consumer-price index rises well above its average level of about 3.4, and to rise when it is significantly below that average. With the CPI now at 237.1, this ratio stands at 5.6.
To be sure, Harvey acknowledges, gold is perfectly capable of taking a long time to return to its fair value — and by no means will the path it takes be a straight line. So a near-term rally isn’t out of the question.
There is a shorter-term factor that nevertheless leads him to doubt gold can mount even a short-term rally that is very significant: rising Treasury yields, which go up as bond prices fall....MORE
We've been calling for a downturn since Alphaville's Izabella Kaminska made a profound observation in Dec. 2012 and specifically targeting $875 since July 2013.
Izzy's story was posted a couple days before an interim high of $1715 so I guess you could say it's been nothing but downhill with Kaminska ever since.
The price this summer has run from the June 3 low at $1,240.20 to the July 1 peak at $1,334.90.
$1316.70 last, off 3.70.
